Volkswagen hopes Touareg revitalizes falling U.S. sales

Volkswagen of America was the comeback star of the 1990s. Now, once again losing ground to rivals, it's trying to regain momentum beginning with the introduction of its first sport utility vehicle, Touareg.

The estimated $50 million launch is marked by VW's wry humor, poking fun at the Touareg name and touting it as "the VW that does what other VWs don't." In a runup to the effort breaking July 1, teaser TV spots from Havas' Arnold Worldwide, Boston, spoof a casting call for a fictional SUV spot. The commercials end with a few seconds of footage of the SUV's front end and the words "The Volkswagen Touareg. Coming soon."

To illustrate the premise that Touareg does "what other VWs don't," one spot in the full campaign shows a Beetle's front end rising off the ground after hooking up a massive recreation vehicle. Then the Touareg is seen in the same situation strutting its 7,700-pound towing capacity.

The push marks the largest spending for a 2003 VW model, said Karen Marderosian, the brand's advertising director, who declined to be specific. But the effort is expected to be sizable to support Touareg, which Frank Maguire, VP-sales and marketing at the automaker called "our most important launch ever." He said it's hoped the SUV will not only bring back former VW owners who left the brand because it had no SUV, but also attract buyers who have never considered VW.

a lot riding

A lot is riding on Touareg. In 2002, both Hyundai Motor America and Mitsubishi Motors North America surpassed VW in total unit sales, and last week VW said its May sales were 27,941 units, down 13% from a year ago. In the first five months of 2003, the carmaker sold 120,150 cars vs. 137,360 a year ago.

Analyst Wes Brown, a partner at consultant Iceology, said VW's core products, such as the Jetta and Golf, are nearing the end of their lifecycles and compete in crowded segments with newer entries. To rectify that, VW has a number of new and updated products in the pipeline and plans to expand its five-car lineup to 12 in the next five years, Mr. McGuire said.

Moreover, German management also plans to give VW in the U.S. more input into model planning Mr. Maguire said.

In what some view as a risky strategy, VW is marching upmarket with Touareg, ranging in price from under $35,000 to $45,000, and late this year will introduce the super-luxury Phaeton sedan, expected to carry a sticker in the $60,000 range. Many experts have criticized VW's plan, saying it will step on its sibling Audi.

Ms. Marderosian, however, said VW buyers don't cross-shop Audi, adding that the brand will continue to stand for German-engineered, quality models that offer value.